In amongst the various innovations and tweaks the Companies Act 2006 brought to the statute books was an explicit provision allowing companies to communicate with and provide information and documentation to their shareholders by "electronic means". Now, companies can provide documentation to their shareholders via their website and communicate with one another via email.

As the 2006 Act enables – rather than empowers – companies to use electronic communications, they will need to take steps to acquire these powers. This can be done either by shareholder resolution or by amending the Articles of Association of the company. It is possible to take a belt-and-braces approach and pass the shareholder resolution and amend the Articles of Association, but strictly speaking this is not necessary.

Once the power is available to the company, it must then contact each shareholder (by non-electronic means) to obtain consent to send and receive information by electronic means. Consent can be given either by an opt-in or an opt-out process, depending on what the company feels is most appropriate.

However, there are practical issues that must be considered: to create an email address that the company's correspondence will come from and be sent to and ways of authenticating the identity of the shareholders.

A range of schemes have been put in place by companies, generally involving Personal ID numbers and passwords, however the legislation does not make any specific requirement. Therefore it may be that an email purporting to come from a shareholder, with a "from" header that confirms the source, will be sufficient for the purposes of most companies with a smaller number of shareholders.

Finally, each company must update its various standard form documents such as meeting notices and proxy forms to take account of the new ability to communicate electronically.

Ailsa Mapplebeck is an associate specialising in corporate finance with UK law firm Shepherd and Wedderburn
0141-566 7225

Back to Search